Health care reform requires most employers to make a major decision about health insurance by 2014: Whether to offer coverage to employees or pay a penalty for not doing so. And the decision is not quite as black and white as it sounds.

The determination to “pay or play” encompasses more than simply weighing the cost of the penalty against the cost of an affordable health plan that meets government standards for minimum coverage. Employers will need to consider how the decision will impact some important measures on a broad scale, such as:

Employee morale and loyalty

Workplace health and wellness

Engagement and productivity

In addition, employers must also consider:

The cost of making employees “whole,” because health care plans are such an essential part of their current compensation package

The ability to attract and retain workers with skills critical to a company’s success without offering health benefits

The need to balance a benefits plan that is attractive to talented workers with the cost controls that are essential to business success, taking into consideration the penalties and tax advantages of each option.

To determine the potential penalties or advantages, employers will have to ask themselves these important questions:

Is the company’s workforce small enough (fewer than 50 full-time equivalent workers) that no penalties will apply?

Does the health coverage the company offers “meet minimum value defined by the government?”

Is the coverage affordable enough according to the thresholds established by the law?

Are any employees eligible for premium assistance, which can trigger a penalty?

These guidelines from the government’s Congressional Research Service provide the details employers need to understand how each of these criteria can impact their decision, and explain how penalties would be calculated in different scenarios.

Another helpful reference is this decision tree provided by the Kaiser Family Foundation. It shows graphically how these answers can impact a “pay or play” decision.